Question 1

What is required margin?

Accepted Answer

Required margin is the minimum amount of capital your broker locks up as collateral when you open a leveraged position. Formula: Required Margin = Position Size ÷ Leverage. This money is not lost — it is held as a deposit and released when you close the trade.

Question 2

What is the difference between used margin and free margin?

Accepted Answer

Used margin is the total capital locked up across all your open positions. Free margin = Account Equity − Used Margin. Free margin determines how many additional positions you can open and acts as a buffer before a margin call.

Question 3

What happens if I get a margin call?

Accepted Answer

A margin call occurs when your free margin falls below your broker's minimum requirement (typically 50–100% of used margin). The broker may warn you to deposit more funds or automatically close your positions to prevent further losses.

Question 4

How do I avoid margin calls?

Accepted Answer

Keep position sizes small relative to your account, use stop losses on every trade, and never use your maximum available leverage. A common rule: never use more than 10–20% of your account as used margin across all positions.

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